Dollar Forced to Abdicate Its Throne 50 comments
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For the most part, the value of the dollar is given cursory attention by the financial media. Typically, its movements are assigned an importance on par with much less determinative metrics such as natural gas futures and construction permits. It's only when major milestones are reached that anyone really takes notice of the dollar. We are living through one of those times.
The great dollar rally of 2008-2009 has come full circle. When the financial crisis exploded in its full ugliness in mid-2008, the dollar, which had steadily declined over the previous four to five years, put in a rally for the record books. By March 2009, as investors across the world sought safety from the financial storm, the index had surged more than 25%. Since then, the dollar has steadily declined to the point where nearly all those gains have vanished. In short, the panic rally has given way to the long term trend.
So, as the dollar index makes fresh 52-week lows on a nearly daily basis, discussion on the greenback is heating up. And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions – both of which are wrong.
The first camp, which is generally supportive of government intervention in the economy, argues that dollar's decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar's decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore 'King Dollar' to its throne.
First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars.
The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario.
On the other side of the argument, those who correctly equate a weaker dollar with a weaker America mistakenly believe that mere posturing by officials or trivial rate hikes would be sufficient to restore the dollar's lost vitality. We are long past that point. The best we can do now is to accept the penalty of a weaker dollar as punishment for our prior failures, and start building for the future.
To save our currency, the Fed must get very aggressive with interest rate hikes and rein in the supply of dollars that have flooded the world over the past few years. The federal government must also do its part by cutting spending, which means no more stimulus and no more bailouts. Undoubtedly, these actions will have unpleasant economic and political consequences. A student who studies harder may have to miss a party or two. A simple analogy, but unfortunately it is that simple.
Even in the unlikely event that our political leaders take these courageous steps, the near-term trajectory of the dollar may still be uncertain. A dollar rally that results from higher interest rates and a narrowing federal deficit may soon fade as the recessionary forces that such moves would unleash act to weaken the dollar once again. But at least we would be building a foundation upon which the dollar could eventually find some footing.
With a restructured economy, higher savings, more capital investment, lower government deficits, and higher interest rates, the United States would once again attract international investment. Funds would flow here not out of fear, as they did last year, but out of confidence. The dollar's strength would not rest on the willingness of foreign governments to buy our debt, but the willingness of foreign consumers to buy our products.
Only then could King Dollar regain its throne.
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This article has 50 comments:
Nothing here good for Americans until Ponzi Politics ends.
When will the stock markets resume their secular bear trend? Sooner than most Americans investors think, but not as quickly as I have thought would be the case. I've underestimated the willingness and bold faced audacity of the big banks to interfere to the extent that they have.
Will the dollar enjoy a bounce? Very likely! When? With sentiment sitting at 96% bearish and indicators sitting at oversold levels never seen before, it stands to reason that the answer is probably "soon", very soon. The market will not respond well to that either, not this time. In years past when the American economy was truly strong, a strong dollar was a legitimate product of that strong economy. Any bounce in the dollar now, wouldn't be a result of a strengthening economy but of something else, I'm not sure what, but not a legitimate strengthening economy. Maybe it will bounce temporarily due to credit tightening or even a more serious credit contraction that lasts a year or more. If that's the case, we're probably looking at a short, sharp period of deflation. Again, the markets won't like that one iota.
The one other possibility that disallows Mr. Schiff to answer the question "when", is the possibility that the administration's owners and handlers have decided to allow the dollar to drop right off the face of the earth right here, right now, with absolutely no intention of supporting it. If that's the case, the dollar will be going on a permanent vacation to its private hideaway in Zimbabwe and this nutty, equity driven, bankster driven stock market rally will simply continue it's unabated journey toward the moon until the world suddenly realizes what the hell is really going on.
And when will that happen? Too soon for comfort and too late for those investors who are kept in the dark by the media arm of the FED.
We need to get our social spending low and take what money we do have and invest in 1. A national energy policy to remove the need for a single drop of foreign oil by 2019. That means real work, new nuclear power plants, new national electric grid system, and investment in wind, solar, and battery technology. 2. Infrastructure investments - be they road, airports, broadband, etc, we've neglected for too long. 3. revamping our military, the Europeans have been freeloaders for a long time at our expense. Time to admit our mistake in Iraq and pull out. Time to close overseas military bases in Germany and Japan, etc. That doesn't mean we pull back to our borders but we don't need to be everywhere. We need to cut 100 Billion a year and dedicate to investments in energy. That will provide more long term security than anything the military can do on the battlefield.
And finally I'd even support a special tax dedicated just to paying down the deficit - as long as it includes forcing Congress to balance the budget every single year. We have spent it (even if I don't agree at all on how we spent it) and now we have to pay it back. Its simply not acceptable to keep putting these things off to the future - it really just means we are being losers and stealing from our children.
> I believe very soon that the G20 will come up an alternative solution, with multiple international currencies, or a single blended currency. <
The critical thing to realize about this very real possibility is that if a "one world" currency emerges as the solution, then the NWO gang will have successfully put another nail in the coffins of all of us.
Let's hope and pray to god (or whoever you prefer) that this isn't the dirty and dark underlying motive in all of this. I have no doubt it is. Surely the FED could show the slightest bit of concern for the dollar? Why aren't they? I'm afraid the answer lies in Bull Run's observation. If the G-20 emerges with the "good news" that they've come up with a "one world currency" as the solution, believe me folks, it ain't "good news".
I don't see how interest rates won't rise, and how that cannot fail to spike the advance in financial products this year, courtesy of bailout $trillions. That will be the real implosion.
Then, Americans will have to think, do we need a Dept of Energy that spends tens of $billions/yr with no positive results whatsoever? Ditto for the Dept. of Education. Ditto, 20-30-and-out public pensions. No more affordable than a wild, credit-fueled shopping spree. Which is what they have been. Such "hard" choices will abound. Elections will hopefully yield a reflection of reality so we can take the first step to recovery: Admitting the problem. Not, expanding it.
We have to get back to work intelligently; the resources in this country are still an enormous blessing. It's still very doable. Our ability to issue enormous debt has to be on it's last legs absent hyperinflation. Our present leadership is depending on the dollar's reserve status to the last possible Treasury, and are clueless or uninterested about getting the country back to work. Time for a change.
For obvious reasons, confidence in the USA is waning and as confidence wanes so trust evaporates. As trust evaporates so the reserve dollar is demoted to the fiat dollar. Should the current behavior, policies and tropes of the US Regime remain unaltered , the fiat dollar will become the fake dollar. Then, it will, at best, be a superegional currency but not a world currency.
A reserve currency becomes fiat scrip by the willed and deliberate abuse of privilege and abrogation of responsibility. American citizens may deny this abuse and abrogation or be ignorant of it or even delude themselves that it is of no account but the rest of world is neither impressed by the empty strutting of the US Regime nor overcome by its serial lies and accumulating deceptions. The dollar is coming into contempt because the US Regime has brought it into contempt. The dollar will descend from contempt into rejection if the US Regime refuses to reform. Since voluntary reform is impossible, either the Regime goes or the dollar falls. The world cannot change the US Regime but it can make the dollar fall.
2. Alternatives to any reserve currency come into being when they must . No grand ,sudden, switch needs to occur based on some academic term paper. Thousands of decisions embedded in millions of transactions spread over several years begin to create emergent stores of value or proto currencies. Multiple such proto currencies can exist in parallel and world flows of trade, transactions, capital, talent and technology will, gradually, organize themselves around these proto currencies.This is already happening.
Then at a time and in a way no insider or incumbent can predict a new currency order will be formed. The world, especially the Global South and Russia, Canada,and Australia(all 3 are asset backed , commodity exporting, economies and Canada and Australia have a per capita real asset endowment that exceeds the per capita real asset endowment of any MidEast country) will go on and leave the US to wallow in its owns vapors and hallucinations.
On Oct 25 01:56 PM davidbdc wrote:
> I'd actually disagree that the interest rates are the key factor.
> We need to balance our budget and start making inroads on the deficit.
> If we do this, then the USA will again be a pillar of strength.
>
>
> We need to get our social spending low and take what money we do
> have and invest in 1. A national energy policy to remove the need
> for a single drop of foreign oil by 2019. That means real work,
> new nuclear power plants, new national electric grid system, and
> investment in wind, solar, and battery technology. 2. Infrastructure
> investments - be they road, airports, broadband, etc, we've neglected
> for too long. 3. revamping our military, the Europeans have been
> freeloaders for a long time at our expense. Time to admit our mistake
> in Iraq and pull out. Time to close overseas military bases in Germany
> and Japan, etc. That doesn't mean we pull back to our borders but
> we don't need to be everywhere. We need to cut 100 Billion a year
> and dedicate to investments in energy. That will provide more long
> term security than anything the military can do on the battlefield.
>
>
> And finally I'd even support a special tax dedicated just to paying
> down the deficit - as long as it includes forcing Congress to balance
> the budget every single year. We have spent it (even if I don't
> agree at all on how we spent it) and now we have to pay it back.
> Its simply not acceptable to keep putting these things off to the
> future - it really just means we are being losers and stealing from
> our children.
Over the centuries wars temporarily shook nations off the gold standard and then the Depression shook many nations off the gold standard at once and in 1946 Bretton Woods restored a modified gold-dollar standard where US dollars were to be the new international money but those dollars were convertible to gold bullion at $35 per ounce. By 1971, needing extra money to finance the Viet Nam war, Nixon abolished convertibility of the US dollar. The US would no longer redeem the dollars other nations held for gold.
Since 1971 the world has still been using the dollar as its international money but by delinking the US dollar from US holdings of gold Nixon set free the US printing presses and unleashed a tsunami of dollars into the world. That process has continued more or less unabated to this day.
A consequence of having the right to simply create the world's money is that the creator nation enjoys the benefit of buying foreign stuff with that money rather than having to produce and trade real goods (this is called "seigniorage", but it is usually applied to governments who have the power to blithely print and spend money into their domestic economy to curry political support, devaluing the currency, rather than face reality and finance spending with unpopular taxes). This became imperative after the first oil shock of 1973 which roughly coincided with peak domestic US oil production as the US needed lots of dollars to pay for more expensive oil imports.
For over 35 years America has been buying oil from the world and paying with freshly created US dollars. For the past 10 years America has similarly been buying Asian consumer goods with newly created dollars. The origin of about 75% of those newly created dollars is US mortgages. So US real estate prices are the underpinning of the asset value of US dollars on banks' balance sheets. It's clear why the Fed and administration are so desperate to reflate US real estate prices.
Collectively these money-printing import purchases add up to become America's accumulated trade deficit with the rest of the world as is measured by the quantity of dollars the world outside of America presently holds, in the neighborhood of $5-7 trillion. To restore the US dollar as an international currency of "value", the US would have to produce $5-7 trillion worth of goods and services to sell to the world in order to redeem all those dollars (or sell half of all US real estate to foreigners, an obvious non-starter). One way or another America currently owes the world roughly $6 trillion worth of "stuff".
To make good on this goods-debt Americans would have to vastly expand production for export and vastly decrease imports and domestic consumption. To sell competitively on global markets US wages and other costs of production would have to plummet relative to costs in other countries. This can be achieved by allowing the fx value of the US dollar to fall to very low levels.
But Americans would suffer very serious standard of living declines, as they worked harder and produced more but consumed less, a double hit on standard of living. US real estate prices would not have to plummet under this scenario so the banking system would not have to go insolvent. Within the US prices and wage levels could remain nominally the same as they are now. It is the foreign exchange value of the dollar that is declining, not the domestic value of the dollar.
But the price of all imports, including oil and all other industrial inputs that the US imports, would skyrocket. Imported flat screen TVs would be back to $5000+. KIA cars from South Korea would cost $50K. Chevies would still sell for $20k because they are made in the US and don't suffer the fx differential of imports. US mining and manufacturing would make a big comeback because Americans could no longer afford to buy imports but could afford to buy domestic production in a weak dollar environment.
Peter is right that a weak currency is no prize for any nation. You have to work harder and live poorer. The countries who currently have trillions of your dollars enjoy all the benefits of your work as they get to consume what you produce rather than vice versa as it has been for so long. You give them goods. They give you your dollars back. You get out of foreign debt this way, humiliating as it may be to your squandered great power status.
But it gets your domestic industries and employment working again and it will eventually get you out of debt. It can even restore your great power status, a status that you are earning again by producing trade goods that the world wants rather than printing money.
Meanwhile a return to gold as the world's international money would prevent this kind of massive trade imbalance from happening again. There would still be imbalances, but they would be short term and self correcting via the discipline of gold.
Our politicians, government officials, and captains of industry don't have the spine to do what's right.
On Oct 25 01:04 PM Albertarocks wrote:
> As an admirer of Peter Schiff "and" his father, both for their insight
> and their courage, I always listen to Peter's messages with a bent
> toward the question of "when". Peter never says exactly "when", because
> he doesn't know when, he "can't" know when. But his message still
> makes so much sense that logic says he has to be right. The "when"
> part is trickier. When what? When will the dollar recover to its
> former position of world leader? Never! Not in its current form.
>
>
> When will the stock markets resume their secular bear trend? Sooner
> than most Americans investors think, but not as quickly as I have
> thought would be the case. I've underestimated the willingness and
> bold faced audacity of the big banks to interfere to the extent that
> they have.
>
> Will the dollar enjoy a bounce? Very likely! When? With sentiment
> sitting at 96% bearish and indicators sitting at oversold levels
> never seen before, it stands to reason that the answer is probably
> "soon", very soon. The market will not respond well to that either,
> not this time. In years past when the American economy was truly
> strong, a strong dollar was a legitimate product of that strong economy.
> Any bounce in the dollar now, wouldn't be a result of a strengthening
> economy but of something else, I'm not sure what, but not a legitimate
> strengthening economy. Maybe it will bounce temporarily due to credit
> tightening or even a more serious credit contraction that lasts a
> year or more. If that's the case, we're probably looking at a short,
> sharp period of deflation. Again, the markets won't like that one
> iota.
>
> The one other possibility that disallows Mr. Schiff to answer the
> question "when", is the possibility that the administration's owners
> and handlers have decided to allow the dollar to drop right off the
> face of the earth right here, right now, with absolutely no intention
> of supporting it. If that's the case, the dollar will be going on
> a permanent vacation to its private hideaway in Zimbabwe and this
> nutty, equity driven, bankster driven stock market rally will simply
> continue it's unabated journey toward the moon until the world suddenly
> realizes what the hell is really going on.
>
> And when will that happen? Too soon for comfort and too late for
> those investors who are kept in the dark by the media arm of the
> FED.
Without the adequate consensus of an overwhelming majority we will just bounce back and forth between the two major parties of career politicians who continue to mismanage our economy and our hard-earned tax dollars. All they know is how to spend and buy votes in order to stay in power. Their priorities do not include what is really best for our country because to make those difficult decisions could mean political suicide (not getting re-elected) and none of them are willing to risk that. So we just plod along with the status quo. I, for one, am tired of the status quo. But I know that I am in the minority. The majority, as pointed out above, is only interested in what government can promise to do for them.
What we really need are leaders who will get the government out of the way where it isn't needed so entrepreneurs and small business owners can get back to creating the jobs we desperately need. We need leaders who will make government more effective in the areas where government is needed: national security, foreign relations/trade, interstate commerce, managing the nation's currency, upholding the rule of law through a fair and equitable judicial & prison system, protecting law-abiding citizens from physical and financial abuse, and guaranteeing our rights as a free people. I may have missed an item or two, but I don't think, at least on the federal level, that a government should be much more involved in our everyday lives. Otherwise what we end up with is over-regulation, over-taxation, less personal freedom, and an economic environment that encourages business to move off-shore (sort of what we have now).
A good summary of the dollar situation. Thanks for posting it.
>So we just plod along with the status quo. I, for one, am tired of the status quo. But I know that I am in the minority. <
I hear a frustrated man talking here. But not a man who has given up.
You know what Mark? I don't think you "are" in the minority insofar as that I think the majority of Americans would agree with you wholeheartedly if they could all hear you. I'll bet 95% of Americans have never even read a statement like that. They should.
But you are certainly in the minority in that there are very few who have a clear understanding of what needs to be done and have the ability to say it so clearly a few short paragraphs like you can. That's a minority you can be proud of.
Saving the US dollar is no longer physically possible. But saving the US economy is quite doable. Read why I believe there is no longer salvation of the US dollar:
stockology.blogspot.co...
On Oct 25 11:56 AM doubleguns wrote:
> What you propose requires Washington to change. They aren't going
> to change unless we change them. Vote them all out. goooh.com
seekingalpha.com/insta...
America has survived several fiat currency collapse before, in its brief history. This country will survive another currency collapse. Most people will not. So position yourself for survival.
Probability of incorporating these intelligent suggestions into policy?
Zero.
And even in the case that we do it, it will immediately result in the whole country plunge into utter chaos and destroy the economy totally, and as the result, the dollar is still going to ZERO.
Now is time to save the dollar or save the US economy. You can not have both, and you can not save the dollar by destroy the economy. You have to choose save the economy and let the dollar die. This is a fact.
On Oct 26 10:12 AM spald_fr wrote:
> Schiff: "To save our currency, the Fed must get very aggressive with
> interest rate hikes and reign in the supply of dollars that have
> flooded the world over the past few years. The federal government
> must also do its part by cutting spending, which means no more stimulus
> and no more bailouts."
>
> Probability of incorporating these intelligent suggestions into policy?
>
>
> Zero.
Dollar has a bottom as long as the renmenbi is pegged. RMB floats and than the bottom drops out.
No meaningful "fix" can ignore the necessity of ending this bleeding and then raising the funds to pay for it (retroactively).
I believe that we are headed for a severe period in our history that will make the Great Depression feel like a Florida vacation.
In any case I support your political campaign and wish you the best of the luck, and very much hope that you are in office to when the proverbial poop hits the fan.
Peter, you seem to be a bit more careful in your criticism and opinion. This is what people like(d) about you. You are not fearful of the mainstream opinion. Please do not become a politician in the sense of censoring your words and actions; it is all that is wrong with America.
I still support you and believe in you. But please remain the Peter Schiff that we have grown to admire and believe in.
The answer to the equation of your excellent outline of what should occur is still Washington and NYC politics. No job creation effort now means serious civil unrest in the near future, NOT our grandkids.
However, the facts on the ground on the decision-making are more then a little disturbing: 40 Czars in Washington, declaring H1 virus a 'national emergency' with a couple thousand deaths (less then most other strains of the flu), Bernanke and Geithner both testifying to Congress months ago they are willing to abandon the dollar in lieu of international currencies, international treaties that supercede the US Constitution and much more suggest to me the decision making has been centered around a command economy and suppression or complete aborgation of Constitutional rights. In other words, Communism as the model in the medium term.
That would be not only bad for investors and the population, but for the entire world. Americans in general can accept working hard for less, hell that has been the tale for most families since 2001. But the loss of the opportunity to benefit would mean more then just a bit of unrest if you catch my drift. The American people always act as a sleeping giant, this time being awoke from the monster within.
Attempted silencing of the rape victim utilizing foreign nations as thugs for hire will yield highly unpredictable results. Awful for American citizens at first, worst for the world at large, horrific for those making such decisions.
On Oct 25 06:32 PM derryl wrote:
> For centuries gold was the international reserve currency and gold
> worked very well to ensure trade imbalances were quickly corrected.
> To import you had to pay from your limited stock of gold. If a nation
> imported too much it would run short of gold and would be unable
> to continue trade deficits for the simple reason that it had no more
> international money--gold--to pay for imports. To get some gold back
> you had to export more than you imported for awhile, so trade imbalances
> were more or less self correcting.
>
> Over the centuries wars temporarily shook nations off the gold standard
> and then the Depression shook many nations off the gold standard
> at once and in 1946 Bretton Woods restored a modified gold-dollar
> standard where US dollars were to be the new international money
> but those dollars were convertible to gold bullion at $35 per ounce.
> By 1971, needing extra money to finance the Viet Nam war, Nixon abolished
> convertibility of the US dollar. The US would no longer redeem the
> dollars other nations held for gold.
>
> Since 1971 the world has still been using the dollar as its international
> money but by delinking the US dollar from US holdings of gold Nixon
> set free the US printing presses and unleashed a tsunami of dollars
> into the world. That process has continued more or less unabated
> to this day.
>
> A consequence of having the right to simply create the world's money
> is that the creator nation enjoys the benefit of buying foreign stuff
> with that money rather than having to produce and trade real goods
> (this is called "seigniorage", but it is usually applied to governments
> who have the power to blithely print and spend money into their domestic
> economy to curry political support, devaluing the currency, rather
> than face reality and finance spending with unpopular taxes). This
> became imperative after the first oil shock of 1973 which roughly
> coincided with peak domestic US oil production as the US needed lots
> of dollars to pay for more expensive oil imports.
>
> For over 35 years America has been buying oil from the world and
> paying with freshly created US dollars. For the past 10 years America
> has similarly been buying Asian consumer goods with newly created
> dollars. The origin of about 75% of those newly created dollars is
> US mortgages. So US real estate prices are the underpinning of the
> asset value of US dollars on banks' balance sheets. It's clear why
> the Fed and administration are so desperate to reflate US real estate
> prices.
>
> Collectively these money-printing import purchases add up to become
> America's accumulated trade deficit with the rest of the world as
> is measured by the quantity of dollars the world outside of America
> presently holds, in the neighborhood of $5-7 trillion. To restore
> the US dollar as an international currency of "value", the US would
> have to produce $5-7 trillion worth of goods and services to sell
> to the world in order to redeem all those dollars (or sell half of
> all US real estate to foreigners, an obvious non-starter). One way
> or another America currently owes the world roughly $6 trillion worth
> of "stuff".
>
> To make good on this goods-debt Americans would have to vastly expand
> production for export and vastly decrease imports and domestic consumption.
> To sell competitively on global markets US wages and other costs
> of production would have to plummet relative to costs in other countries.
> This can be achieved by allowing the fx value of the US dollar to
> fall to very low levels.
>
> But Americans would suffer very serious standard of living declines,
> as they worked harder and produced more but consumed less, a double
> hit on standard of living. US real estate prices would not have to
> plummet under this scenario so the banking system would not have
> to go insolvent. Within the US prices and wage levels could remain
> nominally the same as they are now. It is the foreign exchange value
> of the dollar that is declining, not the domestic value of the dollar.
>
>
> But the price of all imports, including oil and all other industrial
> inputs that the US imports, would skyrocket. Imported flat screen
> TVs would be back to $5000+. KIA cars from South Korea would cost
> $50K. Chevies would still sell for $20k because they are made in
> the US and don't suffer the fx differential of imports. US mining
> and manufacturing would make a big comeback because Americans could
> no longer afford to buy imports but could afford to buy domestic
> production in a weak dollar environment.
>
> Peter is right that a weak currency is no prize for any nation. You
> have to work harder and live poorer. The countries who currently
> have trillions of your dollars enjoy all the benefits of your work
> as they get to consume what you produce rather than vice versa as
> it has been for so long. You give them goods. They give you your
> dollars back. You get out of foreign debt this way, humiliating as
> it may be to your squandered great power status.
>
> But it gets your domestic industries and employment working again
> and it will eventually get you out of debt. It can even restore your
> great power status, a status that you are earning again by producing
> trade goods that the world wants rather than printing money.
>
> Meanwhile a return to gold as the world's international money would
> prevent this kind of massive trade imbalance from happening again.
> There would still be imbalances, but they would be short term and
> self correcting via the discipline of gold.
What we really need to do is force government to do some drastic downsizing and get back to its Constitutionally enumerated functions! These need to be paid for from consumptive taxation, with money already *in* the government coffers. That means a transitional period where the government needs to pay off debt *and* run a surplus. This can only happen by eliminating all socialist entitlements and all spending for functions that are not enumerated powers.
fairtax.org
On Oct 25 01:56 PM davidbdc wrote:
> And finally I'd even support a special tax dedicated just to paying
> down the deficit - as long as it includes forcing Congress to balance
> the budget every single year.
Deep cut of the tax is the key. This is the only way of attract overseas money to come back to America to invest.
Cut capital gain tax, cut corporate income tax. Cut personal income tax. The only thing that nedds to be taxed is when you consume something: I propose a national sales tax to replace income tax. This encourages people to save and invest rather than spend on debts.
Government needs to cut all pork barrel spending. Cut bailout of banks. Let banks fail. Mean while, the money used to bail out the banks should instead be used to boost FDIC fund. The government needs to resolutely provide ABSOLUTE assurance that people have absolutely immediate and prompt access to their deposit money even in the event of bank failures. This is the only way to prevent nationwide bank runs. Once you have that, let all banks that should fail fail on their own.
The only spending the government can not cut is unemployment benefits. It can be reduced but not cut to zero. The government needs to provide the minimum livelihood to people in desperation, but not anything above that. This is absolutely needed to maintain social order and keep the nation in one piece.
On Oct 26 01:40 PM Paco6945 wrote:
> The last thing we need is a special tax to pay down the deficit.
> We need to CUT taxes -- and cut spending even more. And we could
> go a long way towards reducing the trade deficit by eliminating all
> taxes on production (i.e., income taxes and payroll taxes) and replacing
> them with the FairTax.
If the renmenbi peg is removed, the bottom dollar drops out, but the chinese populace may feel so much wealthier that they actually begin to consume. Or, the populace continues to hoard and global velocity of money becomes a fraction of what it was.
On Oct 26 10:30 AM R0bert wrote:
> there is really one key word left out. CHINA
>
> Dollar has a bottom as long as the renmenbi is pegged. RMB floats
> and than the bottom drops out.
The current tarp fix forestalled a collapse of global consequence and the prayer has surfaced tarp will prevent regression. All I see is pundits commenting on this to futher their own agenda, but the current pattern of liquidity is necessary to prevent total collapse. This is not socialism, it is preservation of future capitalism.
On Oct 25 10:48 PM Mark Bern wrote:
> I am truly afraid, even though I do agree that change is necessary
> to bring us out of this mess, that the only way we'll actually get
> to a point of adequate consensus whereby we can finally effect real
> change within the government is to allow the current government to
> make such drastic mistakes that even those who still support them
> will realize that they have made a terrible mistake. When I use the
> phrase "adequate consensus," what I mean is that an overwhelming
> majority (not a simple plurality) of our populating comes to the
> same conclusion: our government is broken and we need more than just
> a change in parties to right the ship.
>
> Without the adequate consensus of an overwhelming majority we will
> just bounce back and forth between the two major parties of career
> politicians who continue to mismanage our economy and our hard-earned
> tax dollars. All they know is how to spend and buy votes in order
> to stay in power. Their priorities do not include what is really
> best for our country because to make those difficult decisions could
> mean political suicide (not getting re-elected) and none of them
> are willing to risk that. So we just plod along with the status quo.
> I, for one, am tired of the status quo. But I know that I am in the
> minority. The majority, as pointed out above, is only interested
> in what government can promise to do for them.
>
> What we really need are leaders who will get the government out of
> the way where it isn't needed so entrepreneurs and small business
> owners can get back to creating the jobs we desperately need. We
> need leaders who will make government more effective in the areas
> where government is needed: national security, foreign relations/trade,
> interstate commerce, managing the nation's currency, upholding the
> rule of law through a fair and equitable judicial & prison system,
> protecting law-abiding citizens from physical and financial abuse,
> and guaranteeing our rights as a free people. I may have missed an
> item or two, but I don't think, at least on the federal level, that
> a government should be much more involved in our everyday lives.
> Otherwise what we end up with is over-regulation, over-taxation,
> less personal freedom, and an economic environment that encourages
> business to move off-shore (sort of what we have now).
(1) Let markets set interest rates
(2) force government to live within its means
(3) unleash capitalism by deregulating, taking on monopolies and special interests and simplifying the tax code
Until individual debt levels are cleaned up and consumer confidence is bouyed by good REAL long term micro-economic prospects the US Gov't MUST continue to print money and be the consumer of last resort.
Banks aren't lending to small businesses. Small businesses aren't hiring. Until those trends reverse and stabilize SOMEONE has to take up the slack. Who do you propose should do that Mr. Schiff?
On Oct 25 07:16 PM socrateaz wrote:
> On the surface your analysis looks good. What products are foriegners
> going to pay more for? Only products they can not get at lower prices
> somewhere else. Or something they can not get elsewhere until they
> can. Then what? All point to the factLower prices are needed to sell
> over seas and most products have already had their excess value squeezed
> out of them. How can you get more money for things people can get
> cheaper elsewhere? Even education in the US is costing more and delivering
> less. Where are foriegn students going to go in the future? The only
> things with excess wealth today are entertainers and sports. That
> will sell well over seas! Regulations are stoping a lot of jobs that
> used to be done in the US. Even food sold overseas is under pressure
> from competition and cost of inputs. You can go far on expectations
> and belief. But what really is the US advantage to work toward balancing
> it's trade? Dreams and beliefs are good but actuality is where the
> rubber meets the road. Producers have supported this country for
> many years. There is little backing behind current producers because
> much of recent wealth already came from there, And there is not that
> much left.